Alliance Boots generated profits of £4.5bn between 2008 and 2013, but financing costs of £4.2bn over the same period, cut its UK taxable profits to £313m.
Photograph Graham Turner for the Guardian

Alliance Boots, which became Britain's biggest private equity buyout in 2007, could have received UK tax bills of more than £1.1bn over the last six years, had colossal interest payments on the group's billions of pounds of borrowings not depressed the chemist and retail group's UK profits, according to tax campaigners.

A report, commissioned by Unite, War on Want and US union group Change to Win, found that Alliance Boots generated UK taxable profits, before interest costs, of £4.5bn between 2008 and 2013. But it also incurred financing costs of £4.2bn over the same period, reducing its UK taxable profits to just £313m.

In addition to noting the tax consequences of Alliance Boots's aggressively structured balance sheet, the report suggested the group's UK tax bill was also disproportionately depressed because substantially all of the group's interest costs have been borne in the UK, where the group makes only a third of its revenues. Meanwhile, Alliance Boots shifted its headquarters to Switzerland in 2008.

"This disproportionate deduction of finance costs from the company's most profitable market has the function of shifting profits out of the UK and thus eroding the UK tax base," the report's authors said.

In a statement, Alliance Boots responded to the report, saying: "We have published a detailed annual report on our website containing comprehensive information on both our tax charge and tax paid. In recent years this has included details of our tax charge and tax paid between the UK and other countries in line with evolving best practice … Alliance Boots conducts its business and organises its tax affairs strictly in compliance with all applicable law – including legislation in the UK – and observes the highest standard of good ethics."

The company privately accepts that interest costs borne in the UK do not map the proportion of profits arising there.

Earlier this year the G20 group of nations began a radical programme to reform the tax treatment of multinational corporations in order to curb what world leaders unanimously agreed was a problem threatening both developed and developing economies around the world.

Among the areas where tax experts from the OECD have promised action is in relation to companies that borrow aggressively, depressing their tax bills.

Tasked by the G20 to come up with new rules by 2015, the OECD experts have also pledged to look at multinational groups artificially shifting business costs — including interest costs — across borders so as to play off one tax regime against the other.

Earlier this month, the IMF produced its own report into tax reform for multinationals. It listed areas of concern, including "taking deductions in high-tax countries by, for example, borrowing there to lend to affiliates in low-tax countries."

Len McCluskey, General Secretary of Unite, said: "The revelation that yet another high street name is fleecing Britain, taking work from our NHS while avoiding their tax responsibilities, will leave taxpayers furious."

John Hilary, executive director at the anti-poverty charity War on Want, said: "It is utter hypocrisy that Boots relies on the NHS for [much of] its UK revenues, while at the same avoiding its own tax responsibilities."

The group had £9bn of borrowings in 2007 and has cut that figure to £5.8bn.